Starbucks Corp. (SBUX: Quote) said Thursday after the markets closed that its third quarter profit rose 19% from last year, helped by higher sales and better expense control.
However, the company's quarterly earnings per share came in below analysts' as well as its own expectations.
At the same time, the company cut its fourth quarter earnings outlook and forecast earnings for its next fiscal year below analysts' current consensus estimate.
Howard Schultz, chairman, president and CEO of Starbucks said, "Despite coming in short of our expectations I am pleased with the increasing operating leverage we are seeing, the fact that this was our 11th consecutive quarter of record results and the fact that we achieved the results in the face of high legacy commodity costs and challenging economic and consumer headwinds in key markets."
Starbucks shares are currently losing 10.31% in after hours trading after closing the day's regular trading session at $52.40, up $1.99 or 3.96%. The shares trade in a 52-week range of $33.72 to $62.00.
The world's largest specialty coffee retailer's same-store sales for the third quarter increased 6%, driven by a 5% increase in traffic and a 2% increase in average ticket.
Starbucks opened 231 net new stores globally, including its 600th store in mainland China, and its first stores in Finland and Costa Rica.
Americas segment revenues grew 9% to $2.5 billion in the third quarter, mainly due to an 7% increase in same-store sales. The 7% same-store sales growth was comprised of an 5% increase in the number of transactions and a 2% increase in average ticket.
Third quarter revenues for the EMEA segment rose 9% to $282.0 million, due to incremental revenues from the consolidation of the Switzerland and Austria markets.
China/Asia-Pacific segment revenue jumped 31% to $181.8 million in the third quarter, due to incremental revenues from 116 net new company-operated store openings over the last 12 months, higher licensed stores revenue and a 12% increase in same-store sales. The 12% increase in same-stores sales was the result of a 8% increase in the number of transactions and a 4% increase in average ticket. The company recorded its eighth consecutive quarter of over 20% sales growth in China.
Channel Development net revenues surged 45% to $316.4 million in the third quarter, mainly due to sales of Starbucks- and Tazo-branded K-Cup portion packs and and growth in packaged coffee sales.
Apart from expanding its operations in China, Starbucks is trying to diversify into other areas. In March, the company inunveiled its first at-home single cup coffee machine Verismo, which will be available in the market this fall. The company will market and sell Verismo machine using its strategic relationship with German-based Krueger GmbH & Co. KG.
The company recently introduced hand-crafted Starbucks Refreshers beverages in select stores in 16 markets around the world, as well as Starbucks VIA Refreshers beverages in the U.S.
Starbucks has also acquired San Francisco-based Bay Bread, LLC and its La Boulange bakery brand, as well as hired renowned French baker Pascal Rigo, to elevate core food offerings and build a premium, artisanal bakery brand.
For the third quarter ended July 1, 2012, Starbucks reported net income of $333.1 million or $0.43 per share, compared to $279.1 million or $0.36 per share for the year-ago quarter.
On average, 28 analysts polled by Thomson Reuters expected the company to earn $0.45 per share for the third quarter.
The company had forecast third quarter earnings of $0.45 to $0.46 per share.
Operating margin for the quarter improved to 14.9% from 13.7% a year earlier, as sales leverage offset the increase in commodity costs mainly coffee.
Total net revenues for the third quarter rose 12.7% to $3.30 billion from $2.93 billion in the same quarter last year. Twenty-five analysts had a consensus revenue estimate of $3.33 billion for the third quarter.
Starbucks also declared a cash dividend of $0.17 per share, payable on August 24 to shareholders of record as of August 8.
The company lowered its fourth quarter earnings outlook to a range of $0.44 to $0.45 per share from its prior outlook of $0.46 to $0.48 per share, to reflect the difficult economic environment. Analysts currently expect the company to earn $0.48 per share for the fourth quarter.
For its fiscal year 2013, Starbucks forecast revenue growth of 10% to 13% and earnings of $2.04 to $2.14 per share. Analysts currently expect earnings of $2.28 per share and revenue growth of 12.4%.
The company plans opening about 1,200 net new stores globally in fiscal 2013, including about 600 net new stores in the Americas, 500 in China/Asia Pacific, and 100 in Europe, Middle East, Russia and Africa. Of the about 600 net new store openings in the Americas, majority will be in the U.S., while more than half of those about 500 net new store openings in China/Asia Pacific will be in China.
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by RTT Staff Writer
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